outline of the u.s. economy
[Editor's Note: We are constantly surveying the investment world for ideas, hidden stories and unique perspectives to share with you. One of our favorite spots to look is The Aden Forecast, which has been written by Mary Anne and Pam Aden for decades. This recent article they crafted for you is testament to why we value their insight and analysis.]
For the past six months or so, we've talked a lot about the velocity of money and its effects. Increasingly, it's become the most important factor in understanding the markets and the uncharted waters we're currently navigating.
For years we've been delicately sailing between the Scylla and Charybdis of our day, between inflation and deflation. And the sharp drop in gold was yet another slide towards deflation's shores.
Meanwhile, the world's central bankers have been at the helm, doing all they can to keep deflationary pressures at bay and steer hard toward inflation.
But despite their unprecedented global efforts, including massive money stimulus and near zero interest rates, the rocky shores of deflation loom larger and larger. Here's why...
outline of the u.s. economy
Symptoms Don't Lie
A good doctor will not simply make a diagnosis based on measurements. The symptoms and complaints expressed by the patient are at least as important in making a determination as the data provided by diagnostic tools.
When the data says one thing and the symptoms continuously say another, it makes sense to question the reliability of the instruments.
This would be particularly true if the instruments are furnished by a party with a stake in a favorable diagnosis, say an insurance company on the hook for treatment costs.
Has Sequestration Saved the U.S. Economy?
There's a Jamaican saying, "the higher the monkey climbs up the tree, the more his butt is exposed."
The point being that the more we rise, the more vulnerable we become.
That has truly come to pass for a pair of superstars of the dismal science. And it could have a big impact on how successfully (or unsuccessfully) we can get the U.S. economy back on the rails.
The Most Dangerous Man in the World
When it comes to spending or saving, it's always a contentious debate.
But the risks are rarely as high as they are now for the U.S. and most major industrial nations. Such fundamental economic decisions will move a country forward (or backward) for decades, not months, and can't be undone quickly.
So let's choose the "winner" and "loser" of this debate carefully.
Yahoo's Daily Ticker host Henry Blodget pronounced last week that Nobel Prize winning economist Dr. Paul Krugman "won" the vicious argument fought between those who want to increase government spending as a means of rebuilding our economy, and those who want to cut spending and reduce deficits as a means of restoring confidence (and rebuilding our economy).
What America's $2 Trillion Underground Economy Says About Jobs
Doing what they can to survive in a dour job market, millions of Americans exist in an underground economy that has ballooned to $2 trillion annually.
By "underground economy," we're talking about all the business activity that is not reported to the government, which includes a growing number of people getting paid for their labor in cash.
That means the shadowy figures of the underground economy - the drug dealers and Mafia godfathers, for example - now have a lot more company.
Ending the War on Pot Would Add $20 Billion to the U.S. Economy
So much for the war on drugs. For the first time ever, a majority of Americans now support legalizing marijuana.
In a recent Pew Research Center poll, 52% of Americans favored full legalization, much higher than the 12% when polling on the issue began in 1969 and up considerably from 32% less than 10 years ago.
According a new report from the Cato Institute, that could inject $20 billion a year into the U.S. economy due to the tax revenue generated and savings in law enforcement costs.
So how big is the market for market for marijuana?
Can Wall Street Continue to Rally Without the U.S. Economy?
We haven't stepped into the Twilight Zone, but it certainly seems that way when stocks are hitting historic highs yet the economy is still so weak that the Federal Reserve is printing money like a Third World nation.
It has the makings of a great prize fight between the largest market in the world and the largest economy in the world.
Can we keep this up? Is this titanic battle going to last like the decades-long Japanese recovery? Will stocks punch themselves out? Can slowing earnings keep stocks soaring?
Here's the blow by blow so far on what's causing what I call the Great Discrepancy. Let me know who you think is going to overtake the other.
Below, I tell you what I think is underway.
The Great American Rebound Has Just Begun
The U.S. manufacturing renaissance is not just a fantasy - it is actually happening. Jobs that had been outsourced to China and elsewhere really are returning to the United States.
Believe it or not, this "reshoring" already has reversed the long, steady decline of manufacturing jobs in the U.S.
In fact, since 2010 America has added roughly 500,000 manufacturing jobs, an increase of 4.3%.
The economic and investment implications of this reversal are considerable to say the least.
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U.S. Economy: "Recovery" Doesn't Fool Struggling Americans
The government's numbers - primarily the monthly data on unemployment and inflation - tell the story of a slow but gradual recovery by the U.S. economy.
But the experience of millions of Americans tells a far different story.
According to a new national survey conducted by the John J. Heldrich Center for Workforce Development at Rutgers University, many Americans continue to suffer from the impact of the Great Recession.
What's more, more than half of those surveyed believe the U.S. economy will not fully recover for another six years, and nearly one-third said the U.S. economy will never fully recover.
"Millions of households were affected to some extent by the layoffs that occurred four years ago," Mark Szeltner, the lead researcher for the Rutgers survey, told The Daily Ticker.
The Rutgers survey backs up what some other surveys have said.
Last August, in a Pew Research survey of middle-class Americans, 42% said they were worse off than they were in 2008.
A Rasmussen survey taken earlier this month showed that only 39% believed the U.S. economy would be stronger in five years - the first time, Rasmussen said, that figure had ever dipped below 40%.
The Frightening Financial Crisis Facing Young Americans
Young Americans are falling deeper and deeper into a financial crisis that will be nearly impossible to escape from in their lifetimes.
Unfortunately, the problems start at a very young age. Not only do a record number of school-age children live in poverty, but the number of homeless children in the public school system has reached an all-time high.
Even young adults who are able to attend college have trouble supporting themselves after graduation. Students take on mountains of debt to pay for school, but all too many of them can't find a decent job that covers their bills and their loans.
And those who do find jobs will likely be working for many more years than previous generations. That's because Social Security is expected to run out well before today's youngest workers retire. Those who have failed to save enough will end up working into their 60s, 70s and 80s.
"We don't know how the story ends, but we know how the story is beginning," Paul Taylor, executive vice president of the Pew Research Center, told CNN. "At the beginning, today's young people are not doing better than yesterday's young adults."
Here are 14 startling statistics painting a bleak financial picture for many young Americans.